7 November 2012

Africa: Turning Smallholding Into Big Business

Photo: Siegfried Modola/IRIN
A Nairobi City Market trader shows his goods on March 7, 2011.

editorial

Millions of smallholders around the world can play a role in delivering food to meet growing demand. But a proactive business mindset will be needed.

Climate change, urbanisation, and population growth pose a challenging set of circumstances for food production. There are thought to be in the region of 500 million smallholder agricultural producers in the world. Some estimates put that figure as high as 800 million. Those farmers will play an important role in meeting growing challenges, aided by increasingly savvy business models.

As delegates from around the world gather in Addis Ababa for the conference 'Making the Connection: Value Chains for Transforming Smallholder Agriculture', a consensus is emerging over the need for a new mindset in which agriculture is seen as a business opportunity. "I want to see my farmers driving the best cars. I want to see rich farmers," says Jethro Greene, chief coordinator of the Caribbean Farmers Network.

Financial management, marketing and business skills are all needed. Farmers may be entrepreneurial, but they are also at the mercy of exogenous influences. "They are dependent on the weather, which none of us can control," says Khalid Bomba, chief executive of the Ethiopian Agricultural Transformation Agency. "They are dependent on the availability of the right inputs on time, which is something we absolutely can control. But they are also dependent on the availability of these new technologies. And, given the risks that they face, they are very risk-averse."

New partnerships are necessary to strengthen the business models of smallholder farmers. NGOs, often seen as public sector agents, are increasingly delivering business management services through coaching programmes, and providing simplified and relevant tuition. If not providing this directly, they may try funding consultants and management companies. They can also prove trail-blazers for the private sector.

"NGOs are well placed to try out new approaches and experiment and when their initiatives work they can be taken up by private sector," says Larry Attipoe, a value chain specialist at SNV Netherlands.

A range of private sector players are emerging to provide business management advice. One firm - Sustainable Management Services - conducts farmer training to improve yields. The cost is covered by the margins of the coffee that SMS markets, but over time farmers may need to contribute to the costs of their training, too, says Thomas Delbar, assistant manager at ECOM, a multinational that funds farmer training from its trading margins, and works with SMS. That process can liberate actors along the value chain from an over-reliance on donor grants.

Large companies also need to change how they look at the smallholders' place in the production chain. On the one hand, the link-up between multinationals and small-scale farmers is a challenge. How can big food retailers seek to work with large numbers of dispersed producers without high transaction costs? But increasingly, it is in their interests to do so.

As demand for food increases, the supply base will struggle to expand at the same pace, due to the constraints of land, growing time and seasons. Smallholders will play a big part in meeting the shortfall. Big businesses in the food sector have an interest in securing their supply base by building longer-term partnerships with producers, and many of them are already doing so.

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